Mercantile Bank Corporation (MBWM) | Investment Case

1. Company Snapshot

1.a. Company Description

Mercantile Bank Corporation operates as the bank holding company for Mercantile Bank of Michigan that provides commercial and retail banking services to small- to medium-sized businesses and individuals in the United States.It accepts various deposit products, including checking, savings, and term certificate accounts; time deposits; and certificates of deposit.The company also offers commercial and industrial loans; vacant land, land development, and residential construction loans; owner and non-owner-occupied real estate loans; multi-family and residential rental property loans; single-family residential real estate loans; home equity line of credit programs; and consumer loans, such as new and used automobile and boat loans, and credit cards, as well as overdraft protection services; and residential mortgage and instalment loans.

In addition, it provides courier services and safe deposit facilities; and insurance products, such as private passenger automobile, homeowners, personal inland marine, boat owners, recreational vehicle, dwelling fire, umbrella policies, small business, and life insurance products, as well as owns 22 automated teller machines and 19 video banking machines.As of January 18, 2022, the company operated 44 banking offices.Mercantile Bank Corporation was incorporated in 1997 and is headquartered in Grand Rapids, Michigan.

Show Full description

1.b. Last Insights on MBWM

Mercantile Bank Corporation's recent performance was negatively impacted by a high loan-to-deposit ratio of 100%, indicating weak deposit growth and limiting its ability to capitalize on strong loan demand. Despite a solid dividend yield of 3.17% and a recent dividend increase to $0.38 per share, the company's growth prospects are hindered by economic downturn risks. The upcoming merger with Eastern Michigan Financial Corporation may pose integration challenges. Additionally, the company's reliance on securities portfolio to mitigate interest rate risk may not yield immediate returns. (Source: Zacks Rank)

1.c. Company Highlights

Last Price	47.51
Change Percentage	-0.23%
Open	47.42
Previous Close	47.62
Market Cap ( Millions)	772
Volume	60778
Year High	51.89
Year Low	37.76
M A 50	45.13
M A 200	45.38

FCF Yield	4.00%
Dividend Yield	3.12%
ROE	13.79%
Debt / Equity	112.24%
Net Debt / EBIDTA	497.20%
Price To Book	1.17
Price Earnings Ratio	9.01
Price To FCF	25.0
Price To sales	2.27
EV / EBITDA	10.62

2. Mercantile Bank Corporation's Strong Q3 2025 Earnings

Mercantile Bank Corporation reported a net income of $23.8 million or $1.46 per diluted share for Q3 2025, surpassing analyst estimates of $1.38. The company's net interest income increased by $3.7 million during the third quarter and $7.3 million during 2025 compared to the respective prior year periods. The earnings per share growth was 20% quarter-over-quarter, with a return on average assets of 1.5% and a return on average equity of 14.7% for 2025. The company's five-year tangible book value per share compounded annual growth rate of 8.4% and five-year earnings per share compounded annual growth rate of 10.4% place it among the top performers in its peer group.

Publication Date: Oct -28

                                    📋 Highlights
                                    20% QoQ EPS Growth::
                                                Earnings per share increased 20% quarter-over-quarter to $1.46, driven by strong net interest income growth and improved loan/deposit growth.
Acquisition of Eastern Michigan Financial::
                                                Anticipated acquisition expected to enhance net interest margin, asset quality, and fee income, aligning with strategic growth targets.
5-Year Tangible Book Value CAGR of 8.4%::
                                                Outperforms peers, reflecting disciplined capital allocation and asset growth, with tangible book value rising $4.27 (13%) YTD 2025.
$7.3M Net Interest Income Increase::
                                                Year-over-year growth in 2025, offsetting a 2-basis-point net interest margin decline, supported by stable loan growth (5-7% Q4 2025 forecast).

                                

Key Drivers of Performance

The company's strong performance was driven by its six key traits: strong and stable net interest margin, very strong asset quality, improved on-balance sheet liquidity and loan-to-deposit ratio, strong deposit and loan compounded annual growth rates, continued strong growth in key fee income categories, and stability in commercial loan portfolio mix. The net interest margin declined by two basis points during 2025 compared to 2024, but the company remains committed to managing its balance sheet to minimize the impact of changing interest rate environments.

Acquisition and Growth Prospects

The company's planned acquisition of Eastern Michigan Financial Corporation is expected to contribute positively to its key traits. The acquisition is expected to bring cost savings starting in 2027, with most of the savings materializing after the core conversion. The company is forecasting loan growth in a range of 5% to 7% annualized during the fourth quarter and expects its net interest margin to remain relatively steady. Analysts estimate next year's revenue growth at 11.0%.

Valuation and Dividend Yield

With a Price-to-Tangible Book Value (P/TBV) ratio of approximately 1.11, Mercantile Bank Corporation's valuation appears reasonable. The company's dividend yield stands at 3.31%, providing a relatively attractive return for income investors. Considering the company's strong financial performance and growth prospects, the current valuation metrics suggest that the stock may be undervalued.

3. NewsRoom

Mercantile Bank Corporation $MBWM Shares Sold by Intech Investment Management LLC

Dec -01

Source: defenseworld.net

Creative Planning Cuts Stake in Mercantile Bank Corporation $MBWM

Dec -01

Source: defenseworld.net

Brandywine Global Investment Management LLC Lowers Stock Holdings in Mercantile Bank Corporation $MBWM

Nov -25

Source: defenseworld.net

Y Intercept Hong Kong Ltd Acquires 4,203 Shares of Mercantile Bank Corporation $MBWM

Nov -06

Source: defenseworld.net

Head to Head Contrast: Ames National (NASDAQ:ATLO) & Mercantile Bank (NASDAQ:MBWM)

Oct -26

Source: defenseworld.net

Contrasting Enterprise Financial Services (NASDAQ:EFSC) and Mercantile Bank (NASDAQ:MBWM)

Oct -24

Source: defenseworld.net

Mercantile Bank (NASDAQ:MBWM) Shares Gap Up Following Earnings Beat

Oct -22

Source: defenseworld.net

Mercantile Bank Corporation (MBWM) Q3 2025 Earnings Call Transcript

Oct -21

Source: seekingalpha.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (2.00%)

6. Segments

Banking and Related Activities

Expected Growth: 2.0%

Mercantile Bank Corporation's 2.0% growth in Banking and Related Activities is driven by increasing demand for credit facilities, expansion of branch networks, and strategic partnerships. Additionally, investments in digital banking infrastructure and cost-cutting initiatives have improved operational efficiency, contributing to the growth.

7. Detailed Products

Commercial Banking

Provides financial solutions to businesses, including cash management, lending, and treasury management services.

Retail Banking

Offers personal banking services, including checking and savings accounts, credit cards, and personal loans.

Wealth Management

Provides investment and wealth management services, including brokerage, trust, and estate planning services.

Mortgage Banking

Offers residential and commercial mortgage lending services, including construction loans and refinancing options.

Treasury Management

Provides cash management and treasury services, including account management, payment processing, and fraud prevention.

8. Mercantile Bank Corporation's Porter Forces

Forces Ranking

Threat Of Substitutes

Mercantile Bank Corporation operates in a highly competitive industry, and customers have various alternatives to choose from. However, the bank's strong brand reputation and customer loyalty mitigate the threat of substitutes.

Bargaining Power Of Customers

Mercantile Bank Corporation's customers have significant bargaining power due to the availability of alternative banking services. The bank must maintain competitive pricing and services to retain customers.

Bargaining Power Of Suppliers

Mercantile Bank Corporation has a diverse supplier base, reducing the bargaining power of individual suppliers. The bank's strong financial position also gives it negotiating power in supplier relationships.

Threat Of New Entrants

The banking industry has significant barriers to entry, including regulatory hurdles and high capital requirements. This limits the threat of new entrants and allows Mercantile Bank Corporation to maintain its market position.

Intensity Of Rivalry

The banking industry is highly competitive, with many established players competing for market share. Mercantile Bank Corporation must invest in marketing and product development to maintain its competitive edge.

9. SWOT Analysis

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

	Value
Debt Weight	61.59%
Debt Cost	3.95%
Equity Weight	38.41%
Equity Cost	8.89%
WACC	5.84%
Leverage	160.37%

11. Quality Control: Mercantile Bank Corporation passed 4 out of 9 key points

Strong Liquidity

Low Deb

Strong Interest Coverage

Healthy Cash Flow

Operating Efficiency

Strong Return On Equity

Consistent Revenue Growth

Consistent Operating Cash Flow Growth

Margin Improvement

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

United Security Bancshares

A-Score: 7.3/10

Value: 6.8

Growth: 5.9

Quality: 7.4

Yield: 9.0

Momentum: 7.0

Volatility: 7.7

1-Year Total Return ->

OpenBank

A-Score: 7.0/10

Value: 7.7

Growth: 6.9

Quality: 6.7

Yield: 8.0

Momentum: 6.0

Volatility: 6.7

1-Year Total Return ->

Westamerica

A-Score: 6.8/10

Value: 5.9

Growth: 6.3

Quality: 8.0

Yield: 7.0

Momentum: 5.0

Volatility: 8.7

1-Year Total Return ->

Mercantile Bank

A-Score: 6.8/10

Value: 6.4

Growth: 7.8

Quality: 6.1

Yield: 7.0

Momentum: 6.0

Volatility: 7.3

1-Year Total Return ->

Bank of Princeton

A-Score: 5.8/10

Value: 5.8

Growth: 5.0

Quality: 6.2

Yield: 7.0

Momentum: 2.5

Volatility: 8.0

1-Year Total Return ->

BankFinancial

A-Score: 5.6/10

Value: 4.6

Growth: 3.6

Quality: 4.2

Yield: 8.0

Momentum: 5.0

Volatility: 8.3

1-Year Total Return ->

Peers Metrics

12.e Scoring ^Insights

12.f DCF ^BETA

Parameters

Short Term Growth

-4.02%

Short term Time

10.0

Long-Term Growth

2.00%

WACC

5.84%

Mercantile Bank Corporation - US5873761044

1. Company Snapshot

1.a. Company Description

1.b. Last Insights on MBWM

1.c. Company Highlights

Higher Growth

Stable Momentum

Average Quality

Earnings Beats

Revenues Beats

Average Yield

Average Growth

Strong Momentum

Fairly Valued

Revenues Miss

2. Mercantile Bank Corporation's Strong Q3 2025 Earnings

Key Drivers of Performance

Acquisition and Growth Prospects

Valuation and Dividend Yield

3. NewsRoom

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (2.00%)

6. Segments

Banking and Related Activities

Expected Growth: 2.0%

7. Detailed Products

Commercial Banking

Retail Banking

Wealth Management

Mortgage Banking

Treasury Management

8. Mercantile Bank Corporation's Porter Forces

Forces Ranking

Threat Of Substitutes

Bargaining Power Of Customers

Bargaining Power Of Suppliers

Threat Of New Entrants

Intensity Of Rivalry

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

11. Quality Control: Mercantile Bank Corporation passed 4 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

47.51$

Current Price

47.51$

Potential

-0.00%

Expected Cash-Flows

12.e Scoring ^Insights

12.f DCF ^BETA